Italian car maker Fiat says it has signed a preliminary agreement with struggling US group Chrysler on an alliance.
Under the proposed deal, Fiat would take a 35% stake in Chrysler in exchange for its technology.
Reports had suggested earlier that a transfer of technology by Fiat would be aimed specifically at enabling Chrysler to develop quickly a complete range of small, front-wheel-drive and low-carbon emission vehicles. The traditional US market for larger cars has collapsed.
Chrysler was bailed out recently with $4 billion from the US government, part of a wider package to help the US car industry make the transition to more advanced, environmentally friendly vehicles.
